Banks in the mutual fund business are now facing pressure from a new direction: companies that want to raid them for top talent.
Just this week, NationsBank Corp. lost a hot portfolio manager of an aggressive stock fund to Eaton Vance Corp., a Boston-based mutual fund company. And headhunters say they are trying to place scores of other bank fund managers in new jobs.
The development sends a mixed message to banks. On one hand, it signals that their fund businesses have come of age. But it also means that banks are in danger of losing their best fund managers to companies that are willing to pay higher salaries and more attractive bonuses.
"Let's face it, portfolio managers are competitive people, and they're not doing this for free," said Herbert I. Hunt, an executive recruiter in Boston. "Portfolio managers for mutual fund companies might make as much as a bank president."
Most banks pay their fund managers a base salary of $75,000 to $150,000, Mr. Hunt said. That's far less than the $150,000 to $250,000 that fund companies shell out.
At least a dozen resumes of bank portfolio managers seeking more lucrative jobs at fund companies or boutique money management firms are stacked on Mr. Hunt's desk, he added.
Among the first bank fund managers to move to a fund company will be Edward "Jack" Smiley, a 16-year NationsBank veteran who is to join Eaton Vance next Friday. Mr. Smiley had managed the Nations Emerging Growth Fund for the past four years.
The fund earned an annualized return of 17.1% over three years, ranking it in the top 35% of small-company funds, according to Lipper Analytical Services, New York.
That performance did not go unnoticed. In a telephone interview Thursday from his home in Charlotte, N.C., Mr. Smiley, 58, said he had been approached by three or four fund companies in addition to Eaton Vance. And many of his NationsBank colleagues are also being wooed.
"You have to give NationsBank credit," Mr. Smiley said; "they've hired good people."
Competition for portfolio managers has intensified in recent months. In August, Bankers Trust New York Corp. lost star manager Mary Lisanti to Strong Capital Management, Milwaukee.
Companies have been spurred to raid each other partly by a relaxation of rules about advertising the track records of their new portfolio managers. The Securities and Exchange Commission said in August that fund managers who jump ship can take their performance records and bragging rights with them.
At Eaton Vance, which manages $14.2 billion mostly in bond funds, Mr. Smiley will manage a new stock portfolio, dubbed the Eaton Vance Emerging Growth Fund. The fund is to be a virtual replica of his former portfolio, which sought out small companies with growth prospects.
Mr. Smiley said he is moving to Eaton Vance not just for a larger paycheck but also to focus solely on running one portfolio - a luxury he did not have at NationsBank. And he was looking forward to working in Boston, the epicenter of the mutual fund world.
"Not a lot of trade shows come to Charlotte," he quipped.
NationsBank, which manages the fourth-largest bank mutual fund family, with $18 billion of assets, is one of a handful of banks that have garnered respect for rapidly snaring assets. A spokeswoman insisted it is making a concerted effort to pay competitively and isn't worried about losing more fund talent.
"Jack is an unusual case, it's not part of a trend," she said. "He just made an individual choice."
Mr. Smiley agreed that NationsBank's pay scale is superior to that of other banks. "They're less vulnerable than 90% of the banks," he said, "because they want to be a big player."
NationsBank said that Tom Clapp, director of equity investing, would take over management of the Nations Emerging Growth Fund. A spokeswoman said Mr. Clapp would "maintain the integrity and performance of that fund."